What affects the INR-USD exchange rate?

01:29 Mins Read

The INR-USD rate is not fixed. Rather, it’s determined by a number of influencers. What are these factors? Find out in this video.

Transcript

What affects the INR-USD exchange rate? You would have probably seen the Indian rupee matched against the US dollar at varying rates at different points in time. Over the years, many factors have influenced this exchange rate. Here are 5 such factors. Firstly, the inflation rate in both India and the USA impacts the INR-USD exchange rate. Secondly, the interest rates also influence the INR-USD exchange rate. Government debt is another factor that affects the INR-USD rate. The next factor we’ll look at is the terms of trade. This is basically the ratio of the index of a country’s export prices to the index of its import prices. So, say India’s exports are higher than its imports. Then, India’s Terms of Trade will improve. So, basically, it will strengthen the Indian rupee. Lastly, the political stability in both India and the USA also affects the INR-USD rate. Well, now you know what influences the INR-USD rate. But before you invest in the US dollar, there are many other things that you should know. Learn all about this in the next chapter of Smart Money.